Politics

Report Shows Stark Debt Differences Between GOP, Dem Cities

Jurisdictions controlled by Democrats have nearly three times the obligation as those with Republican mayors — bills will have to be paid sooner or later

Cities with Democratic mayors have nearly three times as much debt as Republican-run cities, according to a new report by an organization that tracks the finances of state and local governments.

The report by Truth in Accounting, “Financial State of the Cities,” examines the debt load of the nation’s 75 biggest cities. It does not reference the partisan affiliations of the leaders of those cities, but the 52 with Democratic mayors have an average debt of $9,796.15 per taxpayer.

That compares with an average of $3,563.16 per resident for the 19 Republican-run jurisdictions.

Six of the cities have nonpartisan mayoral offices.

The organization produced a similar report in September 2017 showing that states with Democratic governors and Democratic-controlled legislatures on average had more debt than Republican-run states.

Truth in Accounting President Sheila Weinberg said cities have gotten into long-term debt problems for a variety of reasons. Some have suffered economic disruptions that reduced their tax bases. Some have experienced population loss. But much of the problems also have to do with differences in philosophy and political decisions.

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Weinberg said she once asked a Utah official, for example, why the Beehive State so consistently had low debt.

“She said, ‘Well, we just have a philosophy here. We only promise services and benefits that we can afford,'” Weinberg said.

Unfortunately, that has not been the norm in America’s big cities, she said. Overall, the 188-page Truth in Accounting report found that 64 of the 75 biggest cities did not have enough money in fiscal year 2016 to pay their bills. The cumulative unfunded debt of those cities amounted to $335.4 billion.

Weinberg said cities have obscured that debt by pushing off long-term obligations such as employee health and pension benefits.

Pension benefits earned by current employees, she explained, do not come due in the immediate fiscal year. But Weinberg added that the day of reckoning will come.

“The problem is, it is a year-to-year thing, but governments don’t look at it as a year-to-year thing,” she said. “These are bills that were incurred in the past that will have to be paid in the future.”

Raising taxes and cutting services can be painful, said Weinberg. “It’s not an easy situation, and they wouldn’t have gotten into this situation if it were.”

The organization handed out grades to each city. None got an A, for a surplus greater than $10,000 per person. Eleven received a grade of B, and 23 got C grades. The most common grade was D, earned by 34 of the cities, while seven got Fs.

The five cities with the highest debt-per-taxpayer ratios — what Truth in Accounting termed “sinkhole cities” — have reputations for profligate spending. New York City was first, with an average debt of $62,500 per taxpayer. It was followed by Chicago, Philadelphia, San Francisco, and Dallas. That compares with an average of $3,563.16 per taxpayer for the 19 Republican-run jurisdictions.

The report describes each in harsh terms.

About the Big Apple, for instance, the report states: “New York City ranks last because of its massive, growing debts. Despite elected officials’ long-standing claims of ‘balanced budgets,’ the city has about $70 billion in unfunded pension benefits, and nearly $80 billion in retiree health care debt.”

Weinberg said politicians in too many cities have found it tempting to mine for votes from city workers by promising big benefits now without considering the costs down the road. She said that means they face a bleak future of higher taxes, reduced services, or both. And that future for some is not that far away.

“I would look at our home state of Illinois and Chicago,” she said. “They have almost reached the end.”

Raising taxes and cutting services can be painful, said Weinberg. “It’s not an easy situation, and they wouldn’t have gotten into this situation if it were.”

Of course, there is another option — bankruptcy. Stockton, California, in 2012 filed what then was the largest municipal bankruptcy in the nation’s history after a 15-year spending spree that included free health care for retired city firefighters.

Related: Study: Unfunded Debt 12 Times Higher in Democratic-Run States

Bob Deis, the city manager at the time of the bankruptcy, called it a “Ponzi scheme” that helped lead to a $417 million debt. But the city fought its way through bankruptcy a year later and landed in the new Truth in Accounting report as a “sunshine city.” It had a surplus of $3,000 per taxpayer. That was second only to Irvine, California, which had a per-taxpayer debt of $5,200. Lincoln, Nebraska, and Charlotte and Aurora, Colorado, rounded out the top five.

Weinberg said bankruptcy can be an effective way for debt-ridden cities to wash away red ink and get a fresh start. She noted that Detroit’s finances have been in much better shape since a 2013 bankruptcy.

But bankruptcy is not without its drawbacks, Weinberg said.

“The bad part of it is you hand the government over to the courts instead of elected officials,” she said.

PoliZette senior writer Brendan Kirby can be reached at [email protected]. Follow him on Twitter.

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